Here’s how to pay almost zero tax on retirement

Most retirement planning stops at whether your capital will last. It rarely gets to the next one: once you know how much you can withdraw, how do you withdraw it so the tax system takes as little of it as possible? Kananelo Matela, Junior Investment Consultant at 10X Investments, says the answer doesn’t require anything exotic, just an understanding of three things the South African Revenue Service (Sars) already gives taxpayers: an income threshold it doesn’t tax, an account it can’t see into, and a credit it lets you offset directly against whatever bill remains.

Matela says the starting point for any retirement tax conversation is the age-based tax threshold. For the 2027 tax year, retirees between the ages of 65 and 74 pay no income tax on annual earnings below R153 250, approximately R12 770 per month. For those aged 75 and older, that threshold rises to R171 300 annually, R14 275 per month.

“These thresholds are not deductions from income; they are achieved through the primary, secondary, and tertiary rebates that reduce the tax liability itself to zero,” he adds. “For many retirees drawing a modest living annuity, this threshold alone may mean that no tax is payable without any further planning required. The strategies that follow become progressively more valuable as total income rises above this level.” Matela advises people to instead withdraw from their Tax-Free Savings Account (TFSA).

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A place where people park their savings that the tax agency does not tax, and this place becomes more valuable in retirement. Unlike a living annuity drawdown, which is taxable, TFSA withdrawals incur no income tax, capital gains tax, or dividend tax. They do not appear in your taxable income at all.

“A retiree drawing R8 000 per month from a living annuity and R4 000 per month from a TFSA receives R12 000 per month, but only R8 000 of it counts for tax purposes. The remaining R4 000 is not taxed,” he says. “Every rand drawn from a TFSA in retirement is a rand that does not increase your tax liability.

From 1 March 2026, the annual contribution limit increased to R46 000, with the lifetime cap remaining at R500 000. For anyone still in accumulation, this is one of the most important contributions they can make before they stop working.”

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